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Fourth Industrial Revolution Beacons of Technology and Innovation in Manufacturing

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Fourth Industrial Revolution Beacons of Technology and Innovation in Manufacturing White Paper Fourth Industrial Revolution Beacons of Technology and Innovation in Manufacturing In collaboration with McKinsey & Company January 2019 World Economic Forum 91-93 route de la Capite CH-1223 Cologny/Geneva Switzerland Tel.: +41 (0)22 869 1212 Fax: +41 (0)22 786 2744 Email: [email protected] www.weforum.org This white paper has been published by the World Economic Forum as a contribution to a project, © 2019 World Economic Forum. All rights insight area or interaction. The findings, interpretations and conclusions expressed herein are a re- reserved. No part of this publication may be sult of a collaborative process facilitated and endorsed by the World Economic Forum, but whose reproduced or transmitted in any form or by any results do not necessarily represent the views of the World Economic Forum, nor the entirety of its means, including photocopying and recording, or Members, Partners or other stakeholders. by any information storage and retrieval system. Contents Foreword 5 Executive summary 6 1. Lighthouses: Sites Embracing the Megatrends of the Fourth Industrial Revolution 8 Seeing the light: A radical leap forward for Fourth Industrial Revolution front runners 8 Identifying lighthouses 8 2. Overview of the Global Lighthouse Network 10 3. Understanding Lighthouses: Characteristics, Differentiators and Success Factors 14 Lighthouse characteristics 14 Injectors of human capital 14 Industry leaders that are resetting benchmarks 14 Open innovators and collaborators 15 Large and small companies 15 From emerging and developed economies 15 High impact with minimal replacement of equipment 16 4. How Do the Lighthouses Achieve Impact at Scale? 17 Charting a course for scale: Two routes 17 Value drivers for impact at scale 18 Scale-up enablers 18 The current state of lighthouses 18 Three tools to scale Fourth Industrial Revolution technologies in production and overcome 19 pilot purgatory 5. Successful Deployment at Scale: A Close Look at Two Lighthouses 20 Procter & Gamble (P&G) Rakona, Czech Republic: Growth through cost leadership 20 Site history 20 An inclusive vision 20 Top five use-cases 20 Achievements, impact and the road ahead 21 Rold Cerro Maggiore, Italy: Fourth Industrial Revolution implementation in SME 22 Before and after: Transformational changes 22 Key enablers 22 Top five use-cases 22 Achievements, impact and the road ahead 23 6. Call to Action 24 Why act? 24 The Fourth Industrial Revolution is essential to breaking out of productivity stagnation 24 The world is under stress 24 The Fourth Industrial Revolution presents multifaceted opportunities and challenges 24 What needs to be done? 24 Augment, instead of replace, the operator 24 Invest in capability-building and lifelong learning 24 Diffuse technologies throughout geographical areas and include SMEs 25 Protect organizations and society through cybersecurity 25 Collaborate on open Fourth Industrial Revolution platforms and handle data carefully 25 Address the climate change challenge with Fourth Industrial Revolution technologies 25 Fourth Industrial Revolution: Beacons of Technology and Innovation in Manufacturing 3 Contents Who needs to act? 25 Organizations with a lighthouse 25 Organizations without a lighthouse 25 Technology providers, start-ups and universities 25 An opportunity to form a new, global learning platform for the Fourth Industrial Revolution 25 Annex: A Look Inside the Lighthouses – Inside Perspectives 26 1. Value Drivers 26 Big data decision-making 26 Bosch Automotive in Wuxi, China 26 Christophe Chapdelaine, Senior Vice President Manufacturing and Quality Management, 27 Bosch Automotive Diesel Systems Wuxi Babur Ozden, Founder and CEO, Maana 27 Democratized technology on the shop floor 27 Natan Linder, CEO and Co-founder, Tulip Interfaces 27 Melonee Wise, CEO, Fetch Robotics 28 Agile working mode 28 Fast Radius in Chicago, USA 28 Lou Rassey, CEO, Fast Radius 29 Bosch Automotive in Wuxi, China 29 Minimal incremental cost to add use-cases 29 Microsoft’s manufacturing site in Suzhou, China 29 Darren Coil, Director of Business Strategy, Microsoft 30 Melonee Wise, CEO, Fetch Robotics 30 New business models 30 European consumer electronics manufacturer (company name undisclosed) 30 2. Scale-up Enablers 32 Fourth Industrial Revolution strategy and business case 32 BMW Group 32 Christian Patron, Head of Innovations and Digitalization in Production System, and Marcel 32 Eigner, Strategy Digitalization and Smart Data Analytics Production System, BMW Group IoT architecture built for scale-up 33 Hewlett Packard Enterprise 33 Chen Linchevski, Co-Founder and CEO, Precognize 33 Capability-building through acquiring new skills 34 Tata Steel in IJmuiden, Netherlands 34 Hans Fischer, CEO, Tata Steel in Europe 35 Daiane Piva, Improvement Consultant Energy Efficiency, Tata Steel 35 Workforce engagement 35 Schneider Electric in Le Vaudreuil, France 35 Lilian Aube, Le Vaudreuil Plant Union Representative, Schneider Electric 35 Sophie Grugier, Senior Vice President, Global Supply Chain Operations, Schneider Electric 36 Contributors 37 Project Team 37 Endnotes 38 4 Fourth Industrial Revolution: Beacons of Technology and Innovation in Manufacturing Foreword Emitting powerful light that pierces fog and darkness, lighthouses are vital to maritime navigation. They serve as beacons and guides, ensuring safe passage for shipping. At the World Economic Forum’s Annual Meeting 2018 in Davos-Klosters, Switzerland, leaders from public and private organizations decided to seek out manufacturers in a broad range of industries who are leading the way in Fourth Industrial Revolution innovation. Connected by the World Economic Forum’s platform, these model factories – recognized as Fourth Industrial Revolution “lighthouses” – are beginning a unique learning journey that will benefit the production environment. Manufacturing has experienced a decade of productivity stagnation and demand fragmentation; innovation is long overdue. Organizations that have taken Fourth Industrial Revolution innovation to Helena Leurent, scale beyond the pilot phase have experienced unprecedented increases in efficiency with minimal Head of Shaping displacement of workers. However, most companies appear to be stuck in “pilot purgatory”. the Future Widespread adoption of Fourth Industrial Revolution technology at scale, through the combined efforts of Advanced of companies and governments, can lead to a sizeable increase in global wealth production, benefiting Manufacturing people throughout society. and Production Member of The Fourth Industrial Revolution in manufacturing remains a top priority for many leaders of private the Executive and public organizations. It is having an enormous disruptive impact on value chains, industries and Committee, World business models. With one-third of the total economic value of the internet of things (IoT) coming Economic Forum from production,1 factories are the centre of gravity of the ongoing revolution. While manufacturing represents 16% of global GDP,2 manufacturing industries account for 64% of global R&D spend.3 However, there is potential for worker displacement if changes are not handled properly. Strengthened collaboration among stakeholders is needed to understand unexpected consequences and manage the transition. “Lighthouses” are demonstrators of digital manufacturing and globalization 4.0, and exhibit all of the essential characteristics of the Fourth Industrial Revolution. Moreover, they confirm the hypothesis that they have the potential to generate new economic value, driven by improvements in the full spectrum of production value drivers: resource productivity and efficiency, agility and responsiveness, speed to market and customization to meet customer needs. Transforming existing production systems, innovating value chains and building new business models with disruptive potential for established Enno de Boer, businesses can create value. Partner and Global Leader Lighthouses highlight the global nature of production – for example, the lighthouse network includes Manufacturing, German-owned factories in China and a site in Ireland owned by a US company. This shows that McKinsey & innovation is equally relevant in all geographical areas and contexts, from sourcing basic materials to Company, USA process industries to advanced manufacturers addressing specialized needs. Furthermore, it proves that companies of all sizes, from established global blue-chips to small local businesses with fewer than 100 employees, can achieve radical Fourth Industrial Revolution innovation. Lighthouses value collaboration and open their doors to thousands of visitors annually, recognizing that the benefits of this collaborative culture far surpass potential competitive threats. They can serve as an inspiration for defining a strategy, improving the skills of the workforce, collaborating with Fourth Industrial Revolution communities and managing changes from the shop floor throughout the value chain. While they vary in size, industry and geographic location, lighthouses embody nine common distinguishing characteristics. This white paper explores findings derived from these characteristics and calls on industry and government leaders to act. Governments, universities, technology providers and companies are encouraged to use this unique network to navigate and accelerate the inclusive diffusion of technology. The Fourth Industrial Revolution in manufacturing presents the next engine of economic growth, ushering in opportunities to learn and embed values
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